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Commercial Policy with Altruistic Voters

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  • Julio J. Rotemberg

Abstract

This paper considers a specific factor model with two sectors in which agents are altruistic towards domestic residents. I show that, even if the degree of altruism is small, direct democracy leads to commercial policies that are biased against trade as long as the mobile factor is unbiased in the sense of Jones and Ruffin (1977) and the income of the owners of the factor which is specific to the import competing sector is lower than the income of the owners of the other specific factor. Tariffs may be preferred to subsidies by the median voter if subsidies require that beneficiaries spend a fixed cost to demonstrate that they are entitled to these subsidies and there is heterogeneity in the size of producers. Lastly, I construct a model of indirect democracy where legislators can receive campaign contributions from potential lobbyists. Even if campaign contributions are positive in equilibrium, the tariffs that emerge from votes taken after lobbying can represent the wishes of the median voter. In this model, campaign contributions do not buy votes. Instead, consistent with what is claimed in the qualitative literature, they buy access to legislators' time. The model is also consistent with the evidence showing that campaign contributions and lobbying activity are directed mainly at legislators who already agree with their contributors and their lobbyists.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7984.

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Date of creation: Oct 2000
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Publication status: published as Rotemberg, Julio J. "Commercial Policy With Altruistic Voters," Journal of Political Economy, 2003, v111(1,Feb), 174-201.
Handle: RePEc:nbr:nberwo:7984

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  1. Hansson, Ingemar & Stuart, Charles, 1989. "Social Security as Trade among Living Generations," American Economic Review, American Economic Association, American Economic Association, vol. 79(5), pages 1182-95, December.
  2. Snyder, James M, Jr, 1992. "Long-Term Investing in Politicians; or, Give Early, Give Often," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 35(1), pages 15-43, April.
  3. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, American Economic Association, vol. 85(1), pages 46-57, March.
  4. Mayer, Wolfgang & Riezman, Raymond G., 1987. "Endogenous choice of trade policy instruments," Journal of International Economics, Elsevier, Elsevier, vol. 23(3-4), pages 377-381, November.
  5. Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, American Economic Association, vol. 59(4), pages 542-57, Part I Se.
  6. Pinelopi Koujianou Goldbe & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc.
  7. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  8. Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(5), pages 955-67, Sept./Oct.
  9. Baldwin, Robert E & Magee, Christopher S, 2000. " Is Trade Policy for Sale? Congressional Voting on Recent Trade Bills," Public Choice, Springer, Springer, vol. 105(1-2), pages 79-101, October.
  10. Stratmann, Thomas, 1992. "Are Contributions Rational? Untangling Strategies of Political Action Committees," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(3), pages 647-64, June.
  11. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, Elsevier, vol. 47(2), pages 345-370, April.
  12. Stark, Oded, 1993. "Nonmarket transfers and altruism," European Economic Review, Elsevier, Elsevier, vol. 37(7), pages 1413-1424, October.
  13. Ruffin, Roy & Jones, Ronald, 1977. "Protection and real wages: The neoclassical ambiguity," Journal of Economic Theory, Elsevier, Elsevier, vol. 14(2), pages 337-348, April.
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Cited by:
  1. Rafael Di Tella & Juan Dubra & Robert MacCulloch, 2008. "A Resource Belief-Curse? Oil and Individualism," NBER Working Papers 14556, National Bureau of Economic Research, Inc.
  2. Guriev, Sergei & Yakovlev, Evgeny & Zhuravskaya, Ekaterina, 2008. "Interest Group Politics in a Federation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6671, C.E.P.R. Discussion Papers.
  3. Rafael Di Tella & Juan Dubra, 2009. "Anger and Regulation," NBER Working Papers 15201, National Bureau of Economic Research, Inc.
  4. Glazer, Amihai & Ranjan, Priya, 2007. "Trade protection to reduce redistribution," European Journal of Political Economy, Elsevier, Elsevier, vol. 23(3), pages 790-805, September.
  5. Christopher M. Meissner & Jose Ernesto Lopez Cordova, 2005. "Globalization and Democracy, 1870-2000," 2005 Meeting Papers, Society for Economic Dynamics 112, Society for Economic Dynamics.
  6. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and asymmetric lobbying: why governments pick losers," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19726, London School of Economics and Political Science, LSE Library.
  7. Ernesto Dal Bó & Pedro Dal Bó & Rafael Di Tella, 2002. "'Plata o Plomo': Bribe and Punishment in a Theory of Political Influence," Working Papers 2002-28, Brown University, Department of Economics.
  8. Ana I. Balsa & Michael T. French & Tracy L. Regan, 2012. "Relative Deprivation and Risky Behaviors," Documentos de Trabajo/Working Papers, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. 1203, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  9. J. Ernesto Lopez-Cordova & Christopher M. Meissner, 2005. "The Globalization of Trade and Democracy, 1870-2000," NBER Working Papers 11117, National Bureau of Economic Research, Inc.
  10. John M. de Figueiredo & Brian S. Silverman, 2002. "Academic Earmarks and the Returns to Lobbying," NBER Working Papers 9064, National Bureau of Economic Research, Inc.
  11. Spiros Bougheas & Douglas R. Nelson, 2012. "On the Political Economy of High Skilled Migration and International Trade," CESifo Working Paper Series 3880, CESifo Group Munich.
  12. Limao, Nuno & Panagariya, Arvind, 2007. "Inequality and endogenous trade policy outcomes," Journal of International Economics, Elsevier, Elsevier, vol. 72(2), pages 292-309, July.
  13. John M. de Figueiredo & Brian Kelleher Richter, 2013. "Advancing the Empirical Research on Lobbying," NBER Working Papers 19698, National Bureau of Economic Research, Inc.

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